- The number of purchase orders plunged from 51 to 23%
- 67% of traders retain a positive outlook towards the USD
- The nearest resistance around 117.15, namely the weekly R1; the 20-day SMA and the monthly S1
- Major demand area is seen at 113.89 yen
- 53% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Building Permits, US PPI and Core PPI, US Housing Starts, US Capacity Utilization Rate, US Industrial Production, FOMC Meeting Minutes
The US Dollar managed to outperform all other major currencies, except for the Japanese Yen. The Greenback gained the most against the Kiwi, namely 1.04%, however, posted only 0.38% and 0.22% gains against the Aussie and the Loonie. Another huge rally was recorded against the British Pound, which suffered from a poor inflation outlook. The EUR/USD remained relatively unchanged, experiencing a 0.10% decline, but the Buck suffered a rather serious 0.46% loss against the Yen, due to demand for safe-haven assets returning to the markets.
Japan's core machinery orders rebounded in December, despite mounting uncertainty over the global economy. Machinery orders excluding ships and utility items jumped to a seasonally-adjusted 4.2% on month in December, according to the Cabinet Office, following a massive plunge of 14.4% a month earlier. Analysts predicted machinery orders to surge 4.6% in December. Companies anticipate orders to accelerate further in January-March, in an encouraging sign that capital expenditure will support economic growth. Japanese companies expect core machinery orders to surge 8.6% in the first quarter of the year, after rising 4.3% in the October-December period. Measured on an annual basis, core orders in December dropped 3.6%.
Initial estimates of GDP growth showed the world's third biggest economy contracted 0.4% in the December quarter, due to a steep decline in private consumption. On an annual basis the Japanese economy shrank 1.4% during the period, compared with expectations for an annualised contraction of 1.2%. Analysts say Japan needs to ensure exports increase in order to support future economic growth. For every 1% that Japan's economy expands, between 0.5 and 0.7% comes from exports.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
FOMC Meeting Minutes
A number of fundamental economic events concerning the US economy are due today. The Building Permits are released by the US Census Bureau and show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD. However, the most important event is the FOMC Meeting Minutes. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. Insight concerning this year's rate highs is expected to be provided. A dovish statement is likely to drive the US Dollar lower.USD/JPY under the risk of erasing last week's gains
The USD/JPY currency pair's sell-off was limited by the immediate support cluster yesterday, however, it is uncertain whether the cluster will succeed in doing so again today. Technical studies retain their bearish signals, while the risk-off sentiment returned to the markets after another Yuan devaluation by the PBoC. The Yen now has the upper hand against the Buck and could push the pair all the way down to the 112.00 level, which in turn is bolstered by the monthly S3. On the other hand, if bulls manage to take over, the US Dollar could then successfully retake the 115.00 major level.Daily chart
The USD/JPY broke through the support line yesterday and is now under increased risk of posting even heavier losses. The 200-hour SMA appears to be providing too much resistance and preventing the pair from edging higher. Any rally today is also likely to be limited by that area, unless enough impetus is provided for the pair to prolong the bullish trend.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 57% of open positions are long (previously 64%), and the Danish bank reports that 56% of its clients' positions are long, compared to 58% previously.
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to rise above 120 yen
The majority of the survey participants (53%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price intervals, selected by 16% of the voters; however, according to the votes collected between Jan 17 and Feb 17, the mean forecast for May 17 is 118.74. At the same time, 14% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.
This week traders' expectations divided, as now 50% of Dukascopy Community members estimate the pair to gain in value.
According to Likerty, USD/JPY has already confirmed a correction of the recent USD weakness. "The pair could go as high as to 119.50/80 again. For this week – 114.30/70 is an important area," he mentioned.
Among the other 50%, Besim 76 said that the USD/JPY pair fell during the bulk of the week, but found enough support towards the end to turn things back around. "We actually went as low as the 111 area or so, but did get a bit of a bounce. Ultimately, we do think that the market continues to go lower though, probably trying to reach the 110 level," the trader added.